It hasn’t even been a year since Sears, the mall anchor store where there’s always plenty of parking, borrowed half a billion dollars from its own Chairman and CEO Eddie Lampert. Now the once-great retailer that’s living in a converted storage space above its parents’ garage while it sorts things out is borrowing another $100 million from Lampert, with a second $100 million loan possibly coming in just a matter of weeks.
Sears Holdings — parent company of both Sears and Kmart — disclosed the new loan in a filing with the Securities and Exchange Commission on Thursday, noting that the company had borrowed $100 million from ESL Investments, the hedge fund where Lampert is the sole shareholder. If Sears can somehow put up additional collateral, it could borrow an additional $100 million from ESL between now and Dec. 1.
Lampert provided his flagging retailer with the $500 million line of credit in January, but the company has since exhausted the full amount. However, as the Chicago Tribune points out, SHC has managed to pay back a hair more than $100 million to ESL, thanks in large part to the company’s continued sale of its real estate holdings.
These new loans come at a higher price to Sears than the original $500 million line of credit; they must also be repaid earlier. That January deal attached an 8% interest rate with a maturity date of July 2020, while the $100 million and any subsequent loans will carry an 11% interest rate and an April 2018 maturity date.
Lampert has been regularly extending lines of credit and injecting his company — of which he’s the largest single investor — for years, backing those loans on real estate held by the company. Selling off old stores, land, and office buildings has helped to keep the company afloat.
Sears has also brought in much-needed cash off of its long-held house brands. It unloaded the Craftsman tools brand on Black & Decker for $900 million earlier this year. It’s now selling Kenmore appliances through Amazon, and expanded the Kenmore and Die-Hard brands to cover TVs and car tires, respectively.
But there’s only so much real estate and so many brands you can sell off. At some point, Sears needs to get people into its stores and spending lots of cash. SHC’s Kmart stores have reportedly been buying up loads of bottom-dollar inventory from other failing retailers in an attempt to compete with off-price stores like Marshalls and TJ Maxx, which are currently doing better than many other companies during this retail apocalypse.
Speaking of retail doom, Sears Canada is being pushed by its creditors to liquidate its assets ASAP, in spite of a recent court ruling that would have extended its credit protection. ESL Investments is a major shareholder in Sears Canada, which was spun off from SHC in 2012. The Canadian retailer filed for bankruptcy protection over the summer.